Bloomberg News

Osborne Trims Current Budgets to Fund $8 Billion Capital Boost

U.K. Chancellor of the Exchequer
George Osborne will cut the budgets of government departments to
fund a 5 billion-pound ($8 billion) plan to improve Britain’s
infrastructure.

Departmental spending on staff and other running costs will
be cut by 1 percent in the fiscal year that starts in April and
by 2 percent the following year, Osborne told the Cabinet at a
meeting in London today, according to Prime Minister David Cameron’s spokesman Steve Field. The chancellor outlined how he
will achieve some of the savings, amounting to 3.5 billion
pounds by 2015, ahead of tomorrow’s autumn economic statement.

The plan “will be achieved within the government’s fiscal
plans,” Field told reporters. “It will be funded by some
government resource budgets which will be reduced.”

The move is an effort to allocate money, constrained by the
biggest austerity push since World War II, more productively and
is a repeat of a shift announced by Osborne in last year’s
statement. Field said that the measures, together along with a
separate 2 billion-pound annual increase, will lift capital
spending above the average during the previous 13-year
administration under the Labour Party.

About 1 billion pounds of the additional funds have been
allocated to a school-building and expansion project, with the
rest going to transport, science and skills. All of the extra
money will spent within the next two fiscal years, Field said.

“We are committed to solving today’s problems, but also
preparing for tomorrow’s challenges by investing in our future
and equipping Britain for the global race,” the Treasury said.

Osborne will also announce tomorrow an overhaul of
privately financed state services with the aim of deepening cuts
to government running costs, said people familiar with the plan.

He will tell Parliament that about 1.5 billion pounds have
been saved so far and another 1 billion pounds is expected from
the changes, said the people, who declined to be named because
the plans aren’t yet public. The Private Finance Initiative
model will be replaced with a system that aims to speed up the
tendering process and provide more clarity for taxpayers.

To contact the reporters on this story:
Gonzalo Vina in London at
gvina@bloomberg.net;
Robert Hutton in London at
rhutton1@bloomberg.net

To contact the editor responsible for this story:
James Hertling at
jhertling@bloomberg.net